XM, Sirius Plunge After Merger Report

Days after the nation's top telecommunications policymaker signaled his approval of a merger between the two satellite radio providers, XM and Sirius, a negative report released yesterday on the future of the companies sent shares of each firm sharply lower. XM Satellite Radio Holdings' stock fell 17 percent, to $8.61, and Sirius Satellite Radio's stock dropped 12 percent, to $2.13, yesterday. The declines followed a report by Goldman Sachs analyst Mark Wienkes saying that cash flows of the merged company would suffer as satellite radio services faced increased competition from MP3 players and other technologies such as streaming music on the new iPhone. He advised investors to sell the stocks, saying that even though the merger would help reduce costs, subscriber growth would slow and debt would mount over the longer term. Analysts have estimated that the merger would create cost savings of $4 billion to $5 billion through combined research and development, marketing, and sales. But analysts noted that it could take years before those benefits are realized. Wienkes said in his report that the companies would probably have to take on additional debt of $500 million to $1 billion later this year.
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/19/AR200806...
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